We received a 1099-A form from our lender because we abandoned or second vacation home
last 2/27/08. This form shows the balance of our principal, and the fair market value of the
property. My question is, do we still owe money to the lender or to the IRS. Thank You.
Please email at [email protected]

Probably both, but not right away.

This assumes that the balance of the principal EXCEEDS the FMV of the property; otherwise, why would you abandon it instead of selling it.

The fact that the lender sent you the Form 1099-A is required by law under the foreclosure procedures. They may or may not SUE YOU IN COURT for the difference between what you owe and what they get for the property when they sell it. If they do not, then they will issue a Form 1099-C (for Cancellation of Debt), and then you WILL owe the IRS for taxes on that cancelled debt as imputed income.

Given that you abandoned it almost a year ago, I would expect that you will get the Form 1099-C sometime in the next month or so.